Michel Barnier also said Britain must present proposals to avoid a hard border in Ireland – as well as settling its financial accounts “accurately”.

Britain’s hopes of an advantageous free trade agreement with the EU could be dashed if it attempts to use Brexit as an opportunity to abandon the “European model” and transform itself into a low-tax, low-regulation economy, Brussels’ chief negotiator has warned.

Britain’s hopes of an advantageous free trade agreement with the EU could be dashed if it attempts to use Brexit as an opportunity to abandon the “European model” and transform itself into a low-tax, low-regulation economy, Brussels’ chief negotiator has warned.

Michel Barnier said the EU wanted to strike an “ambitious” deal with the UK, but warned that the remaining 27 national parliaments and the European Parliament could refuse to ratify it unless Britain commits to a “level playing field” on issues like fair competition, food safety, social protections and environmental standards.

Mr Barnier also said that Britain must come forward with proposals to avoid a hard border in Ireland – as well as settling its financial accounts “accurately” – if it wishes to make progress towards trade talks at next month’s crunch European Union summit

His comments came as Prime Minister Theresa May prepared to chair a Downing Street meeting at which senior ministers are expected to discuss an attempt to break the deadlock by increasing Britain’s offer on its “divorce bill”.

Downing Street refused to comment on reports that the Cabinet’s Exit and Trade (Strategy and Negotiations) sub-committee could approve a further £20 billion in payments, bringing the total offer to around £38 billion – well short of the 60 billion euro (£53 billion) sought by Brussels.

Speaking during a visit to Birmingham on Monday morning, Mrs May repeated that the UK would “honour our commitments” and “no other European Union country needs fear that they will have to receive less or pay in more”.

European Council president Donald Tusk has set a deadline of the start of next month for breakthroughs on the divorce bill and the Irish border if the EU27 are to conclude at the December 14-15 summit that “sufficient progress” has been made to move on to the second phase of negotiations, dealing with the future trade relationship.

(PA Graphics)

German foreign minister Michael Roth said the EU27 need “clarity” from Britain on its divorce bill, warning: “I currently see no chance of the European Council in December really sending out the signal that these talks can get going.”

Speaking ahead of a meeting of the EU’s General Affairs Council in Brussels, Mr Roth added: “In the end, it’s about the rights of the citizens of the EU and it’s about the money.

“I have already made it clear that the British must make a move. They must stand by their contractual obligations. They can’t be released from them.”

The prospects of progress in December were dealt a blow by the collapse of Chancellor Angela Merkel’s attempts to put together a coalition in Germany, meaning that one of the European Union’s most significant players will be focused on her own position and a possible re-run election rather than being fully engaged in the Brexit process.